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  • Imputing Top‐Coded Income Data in Longitudinal Surveys*

    The incomes of top earners are typically top‐coded in survey data. I show that the accuracy of imputed income values for top earners in longitudinal surveys can be improved significantly by incorporating information from multiple time periods into the imputation process in a simple way. Moreover, I introduce an innovative, nonparametric empirical Bayes imputation method that further improves imputation quality. I show that the empirical Bayes imputation method reduces the RMSE of imputed income values by 19–51% relative to standard approaches in the literature. I also illustrate the benefits of the empirical Bayes method for investigating multi‐year income inequality.

  • The Consumption Euler Equation or the Keynesian Consumption Function?*

    We formulate a general cointegrated vector autoregressive (CVAR) model that nests both a class of consumption Euler equations and various Keynesian‐type consumption functions. Using likelihood‐based methods and Norwegian data, we find support for cointegration between consumption, income and wealth once a structural break around the time of the financial crisis is allowed for. The fact that consumption cointegrates with both income and wealth and not only with income points to the empirical irrelevance of an Euler equation. Moreover, we find that consumption equilibrium corrects to changes in income and wealth, but not that income equilibrium corrects to changes in consumption, which would follow from an Euler equation. We also find that most of the parameters stemming from the class of Euler equations are not corroborated by the data when conditional expectations of future consumption and income in CVAR models are considered. Only habit formation seems important in explaining Norwegian consumer behaviour. Our estimated conditional Keynesian‐type consumption function implies a first year marginal propensity to consume (MPC) out of income of close to 40%.

  • Intergenerational Earnings Persistence in Italy between Actual Father–Son Pairs Accounting for Lifecycle and Attenuation Bias

    Using a longitudinal dataset built merging administrative and survey data, we contribute to the literature on intergenerational inequality providing the first estimate of the intergenerational earnings elasticity (IGE) in Italy based on actual father–son pairs, taking into account issues related to measurement biases and comparing the size of the lifecycle bias when sons are selected by age or by potential experience (i.e. the number of years since the end of their studies). Our findings confirm that Italy is a low‐mobility country. In our baseline estimate, when sons are observed 6 years after the end of their studies, the IGE is approximately 0.41 and is robust to various measures of fathers’ lifetime earnings. However, our results might be downward biased by the young age of sons. To measure the lifecycle bias and correct IGE estimates, we run the ‘forward regression’ of yearly earnings on lifetime earnings on a sample of workers followed for 30 years. We find that selecting sons by potential experience rather than by age reduces the lifecycle bias at young ages and the ‘corrected’ IGE is 0.48. The picture of Italy as a low‐mobility country is also confirmed when we measure the intergenerational association through the rank–rank slope.

  • The Impact of a Billing System on Healthcare Utilization: Evidence from the Thai Civil Servant Medical Benefit Scheme

    This study examines how a new billing process of the Thai Civil Servant Medical Benefit Scheme affects outpatient care utilization. Unlike policy changes considered in most existing studies, there is no change in cost‐sharing for the scheme considered here. Previously, the beneficiaries had to pay out of pocket and receive their reimbursement later. The new billing system allows hospitals to charge the government directly. Using patient‐level data from a large hospital, we find that the change affects outpatient utilization through both visiting rates and treatment intensity. These positive impacts are moderate, but persistent. The estimates are not sensitive to our choice of a time window, but their magnitudes can be sensitive to model specifications. Our analysis also suggests that patients with lower utilization rates (conditional on illnesses) prior to the change in the billing process increase their healthcare utilization more proportionally.

  • Regulating Markets with Advice: An Experimental Study*

    We present a newly designed market experiment to study regulatory measures in markets with advice inspired by two recently developed theoretical models. In line with our predictions, our experimental markets create conflicts of interest and unsuitable advice biased towards high‐commission products. We examine whether two frequently discussed regulation measures – disclosure and fines for ex post unsuitable advice – reduce commission payments and improve advice. None of the regulation measures result in lower commissions and more suitable advice, however, and advice is equally biased in all treatments. Furthermore, with disclosure, conflicts of interest are enlarged, offsetting the potentially restraining effects of disclosure. The potential impact of various behavioural factors is discussed to encourage further research.

  • Ageing Workforces, Ill‐health and Multi‐state Labour Market Transitions*

    We provide novel evidence on the effects of ill‐health on the dynamics of labour state transitions by considering retirement as mobility between full‐time work, part‐time work, self‐employment and inactivity. We employ a dynamic multi‐state model which accounts for state dependence and different types of unobservables. Our model allows for both individual heterogeneity and labour‐state gravity as well as correlations between labour market states. We estimate this model on rich longitudinal data from the Household, Income and Labour Dynamics in Australia Survey. We find that both ill‐health and health shocks greatly increase the probability of leaving full‐time employment and moving into inactivity. Simulated dynamic trajectories suggest larger impacts of long‐term health conditions than those of a one‐off health shock and some evidence of health‐driven retirement pathways via part‐time work and self‐employment. Our findings also indicate that the effects of health changes could be underestimated and the magnitude of true labour market state dependence overestimated if individual effects or labour dynamic transitions are not accounted for in the model.

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  • A Promised Value Approach to Optimal Monetary Policy*

    This paper characterizes optimal commitment policy in the New Keynesian model using a recursive formulation of the central bank's infinite‐horizon optimization problem in which promised inflation and output gap – as opposed to lagged Lagrange multipliers – act as pseudo‐state variables. Our recursive formulation is motivated by (Kydland, F. and Prescott, E. C. (1980). Journal of Economic Dynamics and Control Vol. 2, pp. 79–91). Using three well‐known variants of the model – one featuring inflation bias, one featuring stabilization bias and one featuring a lower bound constraint on nominal interest rates – we show that the proposed formulation sheds new light on the nature of the intertemporal trade‐off facing the central bank.

  • Classical and Bayesian Inference for Income Distributions using Grouped Data

    We propose a general framework for Maximum Likelihood (ML) and Bayesian estimation of income distributions based on grouped data information. The asymptotic properties of the ML estimators are derived and Bayesian parameter estimates are obtained by Monte Carlo Markov Chain (MCMC) techniques. A comprehensive simulation experiment shows that obtained estimates of the income distribution are very precise and that the proposed estimation framework improves the statistical precision of parameter estimates relative to the classical multinomial likelihood. The estimation approach is finally applied to a set of countries included in the World Bank database PovcalNet.

  • Unconventional Monetary Policy and Wealth Inequalities in Great Britain*

    This paper explores whether unconventional monetary policy operations have redistributive effects on household wealth. Drawing on household balance sheet data from the Wealth and Asset Survey, we construct monthly time series indicators on the distribution of different asset types held by British households for the period that the monetary policy switched, as the policy rate reached the zero‐lower bound. Using this series, we estimate the response of wealth inequalities on monetary policy, taking into account the effect of unconventional policies conducted by the Bank of England in response to the Global Financial Crisis. Our evidence reveals that unconventional monetary policy shocks have significant and lingering effects on wealth inequality: the shock raises wealth inequality across households, as measured by their Gini coefficients, percentile shares and other standard inequality indicators. Additionally, we explore the effects of different transmission channels simultaneously. We find that the portfolio rebalancing channel and house price effects widen the wealth gap, outweighing the counterbalancing impact of the savings redistribution and inflation channels. The findings of our analysis help to raise awareness of central bankers about the redistributive effects of their monetary policy decisions.

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